Tuesday, March 29, 2022

Pakistan Prime Minister Imran Khan Demonstrated Effectiveness as Crisis Leader

Prime Minister Imran Khan has effectively led Pakistan through multiple crises in the last 4 years. Khan inherited dangerously low forex reserves in 2018 which are now at  $23 billion, near the highest level in the nation's history. The COVID pandemic that hampered Pakistan's recovery has been handled well with the fully vaccinated rate for the eligible population at more than 75%. Not only has Khan deftly navigated his nation through these crises but his government has also revived the country's economy and grown exports by 26%.  Domestic savings rate recovered to nearly 17% after plunging to a low of 12% in 2018.  The year 2021 was a banner year for Pakistan's technology startups that raised over $350 million in funding, more than the amount raised in the previous 5 years. Manufacturing and construction industries are enjoying a boom last seen during the Musharraf years in 2000-2007. 

Pakistan has pursued an independent foreign policy under the PTI government. The nation has maintained friendly ties with all great powers, including China, Russia and the United States, as well the Islamic world. At a recent OIC foreign ministers' summit in Islamabad, Chinese foreign minister Wang Yi attended and endorsed OIC's support for the movement for “right to self-determination” in Jammu and Kashmir.

Historic Inflation Rates in India & Pakistan. Source: World Bank



Rising prices of food and fuel are still a major issue for the people of Pakistan and the rest of the world. Recent geopolitical crisis with the Russian invasion of Ukraine has only served to accelerate global inflation. It presents a serious challenge to the governments in Pakistan and elsewhere in the world. 

Pakistan's opposition parties have recently come together to try to topple Prime Minister Imran Khan's government. These opposition parties have little in common other than their hunger for power. If they succeed, the country will plunge into yet another period of instability and uncertainty that will reverse progress made in the last few years to stabilize the country's economy. 

Pakistan's Exports:

Pakistan's exports of goods and services have jumped 26% to $25 billion in the first 8 months of the current fiscal year, up from $20 billion in the same period last year. A key reason for recurring balance of payments crises and IMF bailouts has been the lack of growth in Pakistan's exports. 

Pakistan Exports in First 8 Months (July 21-Feb 22) in FY 22. Source: Razzak Dawood


The 26% export growth is particularly welcome after several years of stagnation seen during the PML N government of Prime Minister Nawaz Sharif. 

Job Creation: 

Pakistan’s economy created 5.5 million jobs during the past three years –on an average 1.84 million jobs a year, which is far higher than yearly average of creation of new jobs during the 2008-18 decade, according to the Labor Force Survey (LFS) published by the Pakistan Bureau of Statistics (PBS). 

Pakistan Employment By Sectors. Source: Pakistan Bureau of Statistics

For the first time in recorded history, the labor force participation rate in Pakistan is now higher than in India, according to the ILO/World Bank estimates.



Labor Participation Rates in India and Pakistan. Source: World Bank/ILO



Unemployment rate in Pakistan is just 4.3% in spite of COVID19 pandemic. Jobless rate in India is 8%, much higher than in Pakistan. 

Unemployment Rate in India and Pakistan. Source: ILO/World Bank



Savings Rate:

Pakistan's domestic savings rate recovered to nearly 17% after plunging to a low of 12% in 2018. Savings are extremely important for increased investment to spur GDP growth in any country, including Pakistan.

Pakistan Savings Rate. Source: Global Economy

IMF Bailout:

Pakistan's forex reserves were running dangerously low forcing the country to seek a $6 billion IMF bailout in 2018 to avoid default.  The total reserves now exceed $22 billion.

Reko Diq Mining Deal Revival: 

Prime Minister Imran Khan's government recently resolved an $11 billion in damages that the country faced for improperly canceling a huge copper-gold mining deal in Balochistan.  

Reko Diq is the world's 4th largest undeveloped copper-gold porphyry deposit with over 14 million tons of copper and 21 million ounces of gold. The project was abandoned in 2011 after a Pakistan Supreme Court bench headed by former Chief Justice Iftikhar Chaudhry canceled the mining license granted to Tethyan Copper Company (TCC), a joint venture between Canada's Barrick Gold and Antofagasta Minerals of Chile. TCC challenged the cancellation in the International Centre for Settlement of Investment Dispute (ICSID). On July 12, 2019, the ICSID Tribunal awarded TCC $5.894 billion plus interest of  $700,000 per day in damages against Pakistan. As of 1 March 2022, the award stood at $6.5 billion. The new agreement between Barrick Gold Corporation  and the governments of Pakistan and Balochistan does away with this award. It also increases the share of the project owned by Pakistan from 25% to 50%, brings in $10 billion investment, the largest single investment in the country, and creates 8,000 jobs. Reko Diq is part of the Tethyan metallogenic belt (TMB) that extends from the Balkans in Europe to Pakistan including Serbo-Macedonian, Anatolian, Takab, Kerman and Chagai metallogenic belts. It is believed to be rich in copper and gold deposits.

Manufacturing and Construction Boom: 

Large scale manufacturing grew by 8.2% in February 2022,  after posting 7.6% growth during July-Jan FY22.  

QIM Index 2019-22. Source: APP

Pakistan Large Scale Manufacturing Index. Source: Mettis Global

The LSMI Quantum Index Number (QIM) hit an all-time high of 136.2 points in January, 2022. It averaged 120 points during July-January (2021-22), up from 111.5 points during July-January (2020-21), showing growth of 7.6%, according to latest PBS data.

Cement shipments in Pakistan. Source: All Pakistan Cement Manufacturers Association


Pakistan cement production has increased by double digits to respond to demand for housing and infrastructure construction on Prime Minister Imran Khan's watch. 

Technology Boom:

The year 2021 was a banner year for technology startups in Pakistan.  There was a 437% jump in investments in the startups, raising a total of $352 million across 72 deals in 2021, according to Aljazeera

Pakistan Startup Investments. Source: Aljazeera

Pakistan technology exports have soared 30% to $1.7 billion in the first 8 months of the current fiscal year, according to the State Bank of Pakistan

Expansion of Social Safety Net:

Pakistan's PTI government has built South Asia’s first digital National Socio-Economic Registry (NSER) as a part of its ambitious effort to build a basic social safety net. The Ehsaas (also known as BISP- Benazir Income Support)) program's socio-economic registry includes household information by  geography, age, income, education, health, disability, employment, energy consumption, land and livestock holdings etc. Ehsaas Programs include both Unconditional Cash Transfers (UCT) and Conditional Cash Transfers (CCT). Unconditional Cash Transfers are made only to people living in extreme poverty or distress. Conditional Cash Transfers like Waseela-e-Taleem and Nashonuma  are given for education and nutrition respectively.  In addition, there are feeding centers (langars) for the hungry and shelters (panahgahs) for the homeless. 

OIC Foreign Ministers in Islamabad:

Recent conference of Islamic countries foreign ministers hosted by Pakistan in Islamabad was attended by 56 nations. Chinese foreign minister Wang Yi attended as a special guest. Here's an excerpt of the Islamabad Declaration issued at the conclusion of the two-day conference:

“We declare that the final settlement of the Jammu and Kashmir dispute in accordance with UN Security Council resolutions is indispensable for durable peace in South Asia. We reiterate our call on India to: a) reverse its unilateral and illegal measures instituted since 5th August 2019; b) cease its oppression and human rights violations against the Kashmiris in IIOJK; c) halt and reverse attempts to alter the demographic structure and to redraw electoral constituencies in IIOJK; and d) take concrete and meaningful steps for full implementation of the UN Security Council resolutions on Jammu and Kashmir,”

Response to Indian hostility:

Prime Minister Imran Khan's government won praise for its handling of India's aggression with unprovoked air strikes in Balakot in February 2019. Pakistan responded with "Operation Swift Retort", shot down two Indian fighter jets and captured an Indian Air Force pilot. But Khan's government avoided further escalation of the incident. Similarly, Pakistan responded calmly to the "accidental firing" of Indian Brahmos cruise missile into Pakistan that could have easily escalated into a full-scale war between two nuclear-armed neighbors. 

No-Confidence Vote:

Pakistan's opposition parties have recently come together to try to topple Prime Minister Imran Khan's government. These opposition parties have little in common other than their hunger for power. If they succeed, the country will plunge into yet another period of instability and uncertainty that will reverse progress made in the last few years to stabilize the country's economy. 

Wednesday, March 23, 2022

Russia Sanctions: Taiwan's TSMC Joins Western Ban on Technology For Moscow

Taiwan Semiconductor Manufacturing Company (TSMC) will no longer fabricate computer chips for Russia, according to media reports. The ban will particularly affect Russia's Elbrus and Baikal processors, unless China agrees to step in to manufacture these chips, and risk additional US sanctions itself. Both Russian processors use mature 28 nm technology. The world's most advanced TSMC fabrication technology today is 5 nanometers. The best US-based Intel can do today is 7nm technology. China's SMIC (Semiconductor Manufacturing International Corporation) has the capability to produce chips using 14 nm technology.  Semiconductor chips form the core of all modern systems from automobiles to airplanes to smartphones, computers, home appliances, toys, telecommunications and advanced weapons systems.  

Top 10 Semiconductor Chip Producing Countries. Source: Comtrade Database

China is the world's biggest producer of semiconductor chips, according to data from the United Nations. The electronics value chain, which includes consumer electronics and ICT, has been regionalized over the years, and China has become a major global production center for microelectronics, according to a report in Opportimes. Other major producers include South Korea, Singapore, Malaysia, the United States, Japan, Germany, the Philippines, the Netherlands, and Thailand. In particular, the statistics for China add up the production of Hong Kong and Macao. 

Russia's Semiconductor Imports. Source: WSJ

While China is the  biggest volume producer of semiconductor components in the world,  the Chinese design centers and fabs rely on tools and equipment supplied by the West to deliver products. Western companies dominate all the key steps in this critical and highly complex industry, from chip design (led by U.S.-based Nvidia, Intel, Qualcomm and AMD and Britain’s ARM) to the fabrication of advanced chips (led by Intel, Taiwan’s TSMC and South Korea’s Samsung ) and the sophisticated machines that etch chip designs onto wafers (produced by Applied Materials and Lam Research in the U.S., the Netherlands’ ASML Holding and Japan’s Tokyo Electron ), according to the Wall Street Journal

East vs West Economic Output. Source: Wall Street Journal


There is no question that the current western technology sanctions can seriously squeeze Russia. However, overusing such sanctions could backfire in the long run if the US rivals, particularly China and Russia, decide to invest billions of dollars to build their own capacity. This would seriously erode western technology domination and result in major market share losses for the US tech companies, particularly those in Silicon Valley. 

Related Links:

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Monday, March 21, 2022

Pakistan Revives Reko Diq: One of The World's Largest Undeveloped Copper-Gold Deposits

Canadian mining giant Barrick Gold Corporation and the governments of Pakistan and Balochistan have reached a deal to restart the Reko Diq mining project. Reko Diq is the world's 4th largest undeveloped copper-gold porphyry deposit with over 14 million tons of copper and 21 million ounces of gold. The project was abandoned in 2011 after a Pakistan Supreme Court bench headed by former Chief Justice Iftikhar Chaudhry canceled the mining license granted to Tethyan Copper Company (TCC), a joint venture between Canada's Barrick Gold and Antofagasta Minerals of Chile. TCC challenged the cancellation in the International Centre for Settlement of Investment Dispute (ICSID). On July 12, 2019, the ICSID Tribunal awarded TCC $5.894 billion plus interest of  $700,000 per day in damages against Pakistan. As of 1 March 2022, the award stood at $6.5 billion. The new agreement between Barrick Gold Corporation  and the governments of Pakistan and Balochistan does away with this award. It also increases the share of the project owned by Pakistan from 25% to 50%, brings in $10 billion investment, the largest single investment in the country, and creates 8,000 jobs. Reko Diq is part of the Tethyan metallogenic belt (TMB) that extends from the Balkans in Europe to Pakistan including Serbo-Macedonian, Anatolian, Takab, Kerman and Chagai metallogenic belts. It is believed to be rich in copper and gold deposits.

Reko Diq Copper-Gold Mine

New Reko Diq Deal: 

The new agreement to start Reko Diq waives the ICISD award. In the reconstituted project, Barrick will have 50% ownership and Pakistan 50%, comprising a 10% free-carried, non-contributing share held by the government of Balochistan, an additional 15% held by a special purpose company owned by the government of Balochistan and 25% owned by other federal state-owned enterprises. The federal government’s shares of 25% will be divided equally amongst three state-owned entities (SOE): Oil & Gas Development Corporation Limited (OGDCL), Pakistan Petroleum Limited (PPL), and Government Holdings Pakistan Limited (GHPL). This is a huge improvement over the prior deal that gave the Balochistan government 25% stake in the project, with Tethyan holding the remaining 75%.

A separate agreement provides for Barrick’s partner Antofagasta PLC to be replaced in the project by the Pakistani parties, according to a statement released by Barrick Gold Corporation. Pakistan will buy out Antofagasta’s interest in the mine for $900 million, according to the two companies and the government. 

Production Targets/Social Infrastructure Projects:

When the project goes into production in 5 or 6 years time of development, it will produce 200,000 tons of copper and 250,000 ounces of gold a year for more than half a century. At current prices, the annual copper output will be $2 billion and gold output $500 million. 

The project’s development will bring in investment of approximately $10 billion in Balochistan, including $1 billion which would be invested in social uplift projects such as roads, schools, hospitals, and the creation of a technical training institute for mining. The investment is also said to result in the creation of over 8,000 jobs, according to a report in The Express Tribune newspaper. 

Future Potential:

Reko Diq is part of the Tethyan metallogenic belt (TMB) that extends from the Balkans in Europe to Pakistan including Serbo-Macedonian, Anatolian, Takab, Kerman and Chagai metallogenic belts. It is believed to be rich in copper and gold deposits. 

“Reko Diq could also be the springboard for further exploration and other mineral discoveries along the highly prospective Tethyan Metallogenic Belt,” said Barrick Gold CEO Mark Bristow. 

Foreign Direct Investment:

After reaching a peak of over $5 billion in 2007, foreign direct investment (FDI) in Pakistan has plummeted. It is at least in part attributable to bad decisions by the Pakistan Supreme Court headed by Chief Justice Iftikhar Chaudhry. Cancellation of the Pakistan Steel Mills privatization by the Chaudhry court in 2006. That decision alone has cost Pakistani taxpayers $100 million a year.  Then came the Chaudhry court's decision cancelling the Reko Diq license and the $6.5 billion award against Pakistan. These decisions had a chilling effect on foreign investment in Pakistan. Let us hope the revival of the Reko Diq project helps restore confidence of foreign investors in the country. Let us also hope that this history of unwise court decisions serves as a reminder to the Pakistani judiciary to be more careful in deciding such cases in future. 

Related Links:

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Friday, March 18, 2022

Top India Analysts Dispel "India's Size Illusion"

India's leaders and their western boosters have been promoting the country as an emerging superpower to counter rising China. They cite the size of India's economy, demography, military and consumer market to back up their assertions. These claims are challenged by India's former chief economic advisor Arvind Subramanian and Josh Felman, former head of IMF in India, in an article titled "India's Size Illusion".  In a similar article titled "The Chinese Threat No One Is Talking About — And How to Counter It", Sameer Lalwani, a senior fellow for Asia strategy at the Stimson Center, has raised serious questions about India's ability to counter China in the Indian Ocean region. 

Modi Claims 56 inch Chest 

Modi's 56 inch Chest:

"Desh ka bahut nuksaan hua hai", acknowledged Indian Prime Minister Narendra Modi after his military's 2019 failures against Pakistan in Balakot and Kashmir. This marked a major shift in Modi's belligerent tone that has been characterized by his boasts of "chhappan inch ki chhati" (56 inch chest) and  talk of  "munh tor jawab" (jaw-breaking response) and "boli nahin goli" (bullets, not talks) to intimidate Pakistan in the last few years.  These events should force India's western backers to reassess their strategy of boosting India as a counterweight to China.

India's Illusions:

Indian government's former Chief Economic Advisor Arvind Subramanian has enumerated and challenged arguments for what he calls "India's Size Illusion" as follows:

1. India’s economic size has not translated into commensurate military strength. Part of the problem is simple geography. (German Chancellor Otto Von) Bismarck (1815-1898) supposedly said that the US is bordered on two sides by weak neighbors and on two sides by fish. India, however, does not enjoy such splendid isolation. Ever since independence, it has been confronted on its Western frontier by Pakistan, a highly armed, chronically hostile, and often military-ruled neighbor. More recently, India’s northern neighbor, China, also has become aggressive, repudiating the territorial status quo, occupying contested land in the Himalayas, reclaiming territory in the east, and building up a large military presence along India’s borders. So, India may have fish for neighbors along its long peninsular coast, but on land it faces major security challenges on two fronts.

2.  Then there is the question of market size. As Pennsylvania State University’s Shoumitro Chatterjee and one of us (Subramanian) have shown, India’s middle-class market for consumption is much smaller than the $3 trillion headline GDP number suggests, because many people have limited purchasing power while a smaller number of well-off people tend to save a lot. In fact, the effective size of India’s consumer market is less than $1 trillion, far smaller than China’s and even smaller relative to the potential world export market of nearly $30 trillion.

Indo-Pacific Dominance:

In an article titled "The Chinese Threat No One Is Talking About — And How to Counter It", Sameer Lalwani, a senior fellow for Asia strategy at the Stimson Center, has raised serious doubts about India's ability to counter China in the Indian Ocean region. Here are a couple of excerpts from the article:

1. China has been building dozens of advanced warships that seem poised to head toward the vast body of water through which 80 percent of global seaborne trade transits.....Indeed, a deeper (US) partnership with India — the world’s largest democracy, on an upward economic trajectory, seemingly perfectly positioned to counter China on land and at sea — has been something of a holy grail for at least four U.S. administrations.......Yet what former Secretary of State Hillary Clinton a decade ago called a “strategic bet” on India does not seem to be paying off. Indian naval and political power in the Indian Ocean region is faltering, giving way to influence by Beijing. Many of these problems are of India’s own making.

2. There is increasing discussion and advocacy among China’s foreign policy scholars and former officials about an Indian Ocean fleet. Indeed, the idea is consistent with China’s efforts to acquire military facilities in the Horn of Africa, on Pakistan’s Indian Ocean coast, in Myanmar and in the UAE, which offers access to the Persian Gulf. China has also engaged in intelligence collection efforts in the region and increased its port visits and diplomatic presence.

India's "Accidental" Missile Firing:

India's March 9 "accidental firing" of Brahmos nuclear-capable supersonic cruise missile into Pakistan has raised serious questions about the safety of the Indian nuclear arsenal. Do the people in charge of India's nukes have basic competence to handle such weapons? Was this really an "unauthorized" or "accidental" firing? Why was there a long delay by New Delhi in acknowledging the incident?  Could Pakistan be blamed if it assumed that extremist right-wing Hindu elements had taken control of the missile system in India and fired it deliberately into Pakistani territory? Has the Indian government risked the lives of 1.6 billion people of South Asia?

Could this "errant" missile brought down commercial passenger planes that were in the air at the time of this "accidental" firing? Here's an excerpt from Bloomberg detailing air traffic in the flight path of the Indian Brahmos:

"Several planes passed through the direct trajectory of the missile that day, which flew from the Indian garrison town of Ambala and ended up in Mian Channu in Eastern Pakistan. They included a Flydubai jet heading to Dubai from Sialkot, an IndiGo plane going from Srinagar to Mumbai and an Airblue Ltd. flight from Lahore to Riyadh. All crossed the missile’s trajectory within an hour of its accidental launch, data from flight-tracking application Flightradar24 show.  Other international flights in the vicinity of the missile’s trajectory -- and within its range -- included a Kuwait Airways Co. jet heading to Guangzhou, China from Kuwait City, a Saudi Arabian Airlines flight to Riyadh from New Delhi, and a Qatar Airways service from Kathmandu to Doha, the data show. No advisory to pilots operating in the vicinity -- known as a notice to airmen or NOTAM -- was issued". 

India: A Paper Elephant:

In an article titled "Paper Elephant", the Economist magazine talked about how India has ramped up its military spending and emerged as the world's largest arms importer. "Its military doctrine envisages fighting simultaneous land wars against Pakistan and China while retaining dominance in the Indian Ocean", the article said. It summed up the situation as follows: "India spends a fortune on defense and gets poor value for money".

After the India-Pakistan aerial combat over Kashmir, New York Times published a story from its South Asia correspondent headlined: "After India Loses Dogfight to Pakistan, Questions Arise About Its Military".  Here are some excerpts of the report:

"Its (India's) loss of a plane last week to a country (Pakistan) whose military is about half the size and receives a quarter (a sixth according to SIPRI) of the funding is telling. ...India’s armed forces are in alarming shape....It was an inauspicious moment for a military the United States is banking on to help keep an expanding China in check".

Wednesday, March 16, 2022

Pakistan Air Force: The Only Air Force That Shot Down Multiple Russian Fighter Pilots in Combat Since WWII

As the United States and other NATO members hesitate in imposing No-Fly zone over Ukraine for fear of direct confrontation with Russia, here's a piece of history from the Soviet invasion of Afghanistan in the 1980s: The Pakistan Air Force (PAF) has the distinction of being the only air force that has engaged and shot down multiple Russian fighter pilots in combat since WWII.  The most prominent among those shot down by PAF was Colonel Alexander Rutskoy who ejected over Pakistani soil and was captured by Pakistan. After his release, Rutskoy was decorated as a hero of the Soviet Union and went onto become vice president of Russia under Boris Yeltsin, before leading an attempted coup in 1993, according to The National Interest publication. 

Col Alexander Rutskoy of USSR Air Force Shot Down Over Pakistan


In 1986, the F-16s of the Pakistan Air Force's No. 9 Griffin and 14 Shaheen squadrons began flying combat air patrols along the Afghan border. That year.  The Soviet and Afghan forces began a series of offensives targeting mujahideen bases in the Panjshir valley, supported with intensified bombardments of refugee camps.  Here's an excerpt from The National Interest report on the subject: 

"By 1987, Soviets records indicate that Pakistani fighters had begun roaming into Afghan airspace—particularly harassing efforts to provide aerial resupply to besieged garrisons like Khost, only ten miles across the border. On March 30, 1987 two F-16s intercepted an An-26 twin-turboprop cargo plane near Khost, each striking it with one Sidewinder from just under a mile away. The ponderous cargo plane crashed into the snowy mountains below, killing all 39 aboard. Over the course of the conflict, Pakistani F-16 pilots also claimed the destruction of several Mi-8 transports helicopter, another An-26 on a reconnaissance mission in 1989, and a maneuver kill versus an An-24 transport which was actually attempting to defect..........On November 3, 1988 the PAF would bag its final jet kill when Lt. Khalid Mahmood shot down a DRAAF Su-2M4K. Pakistan formally credits its F-16 pilots with 10 kills during the conflict, while Soviet records confirm the loss of three Su-22s, an Su-25 and An-26. Some sources claim the PAF shot down at least a dozen more aircraft during the Soviet war in Afghanistan which ostensibly were not formally credited because they involved violations of Afghan airspace".  

Pakistan took enormous risks in the 1980s by supporting and providing sanctuaries to the Afghan Mujahideen insurgents who fought the Soviet occupation of Afghanistan. Pakistan Air Force took on the Soviet Air Force and shot down several Russian fighter aircraft in dogfights. Pakistanis did this knowing that the US provided no security guarantees to Pakistan. Are Poland and Romania, both NATO members, willing to take such risks? Would the United States allow these NATO members to risk a broader war with Russia? Here's an excerpt from an article by Bruce Riedel, senior fellow and director of the Brookings Intelligence Project. It is titled "Could Ukraine Be Putin's Afghanistan?":

"Being the frontline state behind the mujahideen brought considerable risk and danger for Pakistan. The Russians supported Pakistani dissidents who organized terror attacks inside the country including hijacking Pakistani civilian aircraft and attempts to assassinate Zia (who died in a suspicious plane crash in 1988). Pakistani fighters engaged Soviet aircraft in dogfights. The Pakistani tribal border areas became dangerous and unruly. A Kalashnikov culture emerged that still haunts Pakistan today". 

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Monday, March 14, 2022

Can Modi's India Be Trusted With Nukes?

India's March 9 "accidental firing" of Brahmos nuclear-capable supersonic cruise missile into Pakistan has raised serious questions about the safety of the Indian nuclear arsenal. Do the people in charge of India's nukes have basic competence to handle such weapons? Was this really an "unauthorized" or "accidental" firing? Why was there a long delay by New Delhi in acknowledging the incident?  Could Pakistan be blamed if it assumed that extremist right-wing Hindu elements had taken control of the missile system in India and fired it deliberately into Pakistani territory? Has the Indian government risked the lives of 1.6 billion people of South Asia?



Top Indian defense analysts Sushant Singh and Bharat Karnad have strongly criticized the Indian government for the incident and its response. Singh has accused the Indian government of risking the lives of 1.6 billion people.  Karnad has called the incident "quite shocking and simply cannot be credibly explained away by referring to a 'technical glitch'". Both have praised Pakistan's "mature" response to the incident. 

In an OpEd in the Deccan Herald, Mr. Singh says "we (India) have come out looking like either bumbling idiots or out of control, while the Pakistanis have come out as being both capable and mature".  In an interview with Rediff, Professor Karnad said, "This is quite shocking and simply cannot be credibly explained away by referring to a ‘technical glitch’".  Here are more detailed excerpts of remarks by Singh and Karnad:  

Excerpts From "A Broken Arrow" by Sushant Singh published in the Deccan Herald: 

"India and Pakistan are nuclear weapon states that came close to climbing the escalation ladder in the aftermath of the Balakot airstrikes just three years ago. My column in this paper on February 27 (“Three years ago, we were on the brink of war”) had warned of the risks highlighted in February-March 2019, which have been overlooked since. The accidental firing of an Indian missile has brought the spotlight on those risks again. It would be irresponsible to ignore them now".

"The lives of 1.6 billion people of India and Pakistan cannot be dependent on such lucky breaks. It is for these reasons – the destructive capacity of nuclear weapons, the minimal time available to take a decision, and Pakistan’s strategic mindset – accidents are unacceptable. Questions raised in western capitals about the safety and security of our nuclear weapon systems and processes were regularly dismissed by New Delhi by citing its impeccable track-record and supposedly fool-proof systems. It allowed India, despite the concerted efforts of certain American experts, to de-hyphenate itself from Pakistan’s poor track record of proliferation, its weak security systems always seen to be at risk of being infiltrated by religious religious extremists in uniform. On issues of nuclear safety, Pakistan has always attempted to bracket India with itself, but has often failed. But now, we have come out looking like either bumbling idiots or out of control, while the Pakistanis have come out as being both capable and mature. India can dismiss all Pakistani allegations but there will be renewed questions from the US non-proliferation lobby that are going to be tougher for New Delhi to respond to".

"India, as the bigger country, has the cushion of geography, while Pakistan, driven by the insecurity of a small territory, has a nuclear security doctrine of ‘first use’. To avoid the destruction of its arsenal and delivery systems by a pre-emptive Indian strike, it deems it necessary to strike India first in the event of hostilities threatening to break out. This makes the situation more dangerous in the subcontinent"

"An environment of relative calm between India and Pakistan, with a ceasefire on the LoC in Kashmir, definitely helped the Pakistani military keep its cool in the face of an Indian missile. Would it have reacted so maturely in the midst of military or political tensions? Or can Pakistan be blamed if they assume that certain rogue elements had taken control of the missile system in India and fired on it? Crucially, if the missile had a self-destruct feature, why wasn’t it activated? Should we expect every junior Pakistani military officer to display the same sagacity and courage as the Soviet naval officer Vasili Arkhipov, the Brigade Chief of Staff on submarine B-59, who refused to fire a nuclear missile and prevented a nuclear disaster in 1962? Or of the Soviet military duty officer Stanislav Petrov who, on seeing an early-warning system showing an incoming US strike, with about half-a-dozen missiles, in the early hours of September 26, 1983, made the call – in the face of incomplete information and doubt -- that it was a system malfunction, instead of reporting it to his superiors as enemy missile launches?"

Excerpts From Bharat Karnad's Interview with Rashme Sehgal:

RS: What does this say about their safety mechanisms and the technical prowess in the way these dangerous weapons are being maintained in India?

BK: That’s precisely the worry attending on this misfiring.

Indeed, the Pakistani government was quick to capitalise on this incident of the Brahmos missile going astray.

Prime Minister Imran Khan’s National Secrity Adviser Dr Moeed Yusuf publicly expressed concern and asked the international community to note the fairly casual manner in which missiles are operated.by the Indian armed forces.

He went on, understandably, to extend that concern to India’s handling of nuclear weapons and their delivery systems.

Such criticism is bound to have an effect on international opinion and hurt India’s self-confessed status as a ‘responsible State’.

RS: The defence ministry seems to have landed with egg on its face.

BK: A whole barnyard full of eggs, in fact. This is quite shocking and simply cannot be credibly explained away by referring to a ‘technical glitch’.

The triggering mechanism is a hardy piece of work including a firing sequence and a final authorisation.

How this process was obviated is a mystery.

RS: Pakistan’s foreign office summoned India’s charge d’affaires in Islamabad to lodge a warning that this unprovoked violation of its airspace could have endangered passenger flights and civilian lives.

BK: Well, yeah, anything could have happened, including the missile, even with a dummy warhead, kinetically taking out a passenger aircraft.

In your view, could this have been a BrahMos cruise missile possessing nuclear capability?

The Brahmos missile has interchangeable warheads and can carry both conventional and nuclear weapons.

But most forward-deployed Indian cruise missiles are conventionally armed.

RS: If it was a nuclear missile — albeit unarmed — is there a possibility in the future that the command and control system could fail again in the future which could have dangerous consequences for both nations?

BK: Unless the government clarifies the nature of the ‘technical glitch’ everything is in the realm of speculation. That could include a faulty command and control system.

RS: According to reports, Pakistani officials claim it was fired from Sirsa. How far is that assessment correct?

BK: No reason to doubt the Pakistani claim because the Pakistani air defence complex at Sargodha, District Miani, is very advanced and capable of detecting cruise and ballistic missile firings and minutely tracking their trajectory.

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Saturday, March 12, 2022

Will Russia Sanctions Accelerate Inflation, Devalue US Dollar and Strengthen Chinese Yuan?

Russia is a commodities superpower. The nation's Eurasian landmass is rich in all kinds of natural resources from food to fuel to metals. To punish Moscow for invading Ukraine, the US and G-7 nations have imposed sanctions on Russia. These sanctions have effectively removed Russian commodities from the global supply chain, triggering double digit price increases for food, fuels and metals. Will the G-7 actions leave the US dollar much weaker? Will the Chinese currency, backed by commodities, gain strength at the expense of the US dollar and Euro? Will the era of commodity-backed money return? In a note to clients, Credit Suisse investment strategist Zoltan Pozsar has answered some of these questions. He says "this (Russia) crisis is not anything we have seen since President Nixon took the U.S. dollar off gold in 1971". "After this war is over, "money" will never be the same again.....and bitcoin (if it still exists then) will probably benefit from all this,” he adds. 

Map of "International Community" Sanctioning Russia

Post World War II History:

The current global financial system was created in Bretton Woods located in the US State of New Hampshire.  Over 700 delegates representing 44 countries met in Bretton Woods in July 1944. The Bretton Woods System, now referred to as Bretton Woods I, required a currency peg to the U.S. dollar which was in turn pegged to the price of gold. This system collapsed in the 1970s but created a lasting influence on international currency exchange and trade through its development of the IMF and World Bank. Zoltan Pozsar believes it is now time for Bretton Woods III. What is Bretton Woods III? Here's how Zoltan Pozsar explains it:

"From the Bretton Woods era backed by gold bullion, to Bretton Woods II backed by inside money (Treasuries with un-hedgeable confiscation risks), to Bretton Woods III backed by outside money (gold bullion and other commodities)". 

Russia's Commodity Exports. Source: Bloomberg

Commodity Superpower: 

Russia is a vast country. Russian landmass extends from Europe to East Asia. It is one of the largest suppliers of oil, gas, metals and wheat. Russia is also a major exporter of fertilizer. China will likely take advantage of the western sanctions to buy up Russian commodities at lower prices. 

Pozsar argues that while Western central banks cannot close the gap between Russian and non-Russian commodity prices as sanctions lead them in opposite directions, the People’s Bank of China can “as it banks for a sovereign who can dance to its own tune.”

“If you believe that the West can craft sanctions that maximize pain for Russia while minimizing financial stability risks and price stability risks in the West, you could also believe in unicorns,” Pozsar wrote.

Pre-Ukraine War Inflation in US. Source: Wall Street Journal


Bretton Woods III:

Pozsar argues that the Bretton Woods II collapsed when the G7 countries seized Russia’s foreign exchange (FX) reserves, leading to a rise of outside money – reserves kept as commodities – over inside money – reserves kept as liabilities of global financial institutions. 

East vs West Economic Output. Source: Wall Street Journal


"We are witnessing the birth of Bretton Woods III – a new world (monetary) order centered around commodity-based currencies in the East (Chinese Yuan) that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West,” Zoltan wrote. 

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Wednesday, March 9, 2022

Karachi-Born Ukrainian Billionaire Believes “Ukraine is Going to be Next Afghanistan for Russia"

Pakistani-Ukrainian billionaire Mohammad Zahoor believes “Ukraine is going to be the next Afghanistan for Russia". Talking with Arab News, he said: “This is time, actually, for us not to keep quiet. We have to take sides". After the Russian invasion, Zahoor left Kiev for Britain along with his wife and two daughters. Zahoor owns real estate and steel businesses in Ukraine. He is also a British citizen. He was recently in Pakistan to attend the funeral of his sister-in-law who died of COVID-19.

Mohammad and Kamaliya Zahoor

Zahoor told Arab News that the Russian invasion of Ukraine may have consequences for Russia similar to the fallout from the Soviet-Afghan war from 1979 to 1989, which drastically weakened Russia's military and economy. That defeat in Afghanistan was one of the major reasons for the dissolution of the Soviet Union.

“Ukraine is going to be the next Afghanistan for Russia,” he said. “I don’t know how many years they are going to be in Ukraine, but once they are out, they will be broken into pieces.

Zahoor's prediction can only be realized if there is a frontline state in Europe that is willing to take enormous risks that Pakistan took in the 1980s by supporting and providing sanctuaries to the Afghan Mujahideen insurgents who fought the Soviet occupation of Afghanistan. Pakistan Air Force took on the Soviet Air Force and shot down several Russian fighter aircraft in dogfights. Pakistanis did this knowing that the US provided no security guarantees to Pakistan. Are Poland and Romania, both NATO members, willing to take such risks? Would the United States allow these NATO members to risk a broader war with Russia?

Oligarchs have shaped politics in post-Soviet Russia and other former Soviet republics including The Ukraine since the breakup of the Soviet Union in 1991. Among them is Karachi-born Pakistani Ukrainian Mohammad Zahoor, a member of growing Pakistani diaspora which is already the world's 7th largest. He owned the Kyiv Post newspaper which is widely believed to have led the campaign to topple pro-Russian President Viktor Yanukovych.

Zahoor's father Khushal Khan worked for Pakistani government. He migrated to Karachi from Hasnaina village in the Mansehra district of Khyber Pakhtunkhwa province. Zahoor was born in 1955 in Karachi.  His ISTIL Group operates from a head office in Kiev. It also has offices in the UK, Pakistan, UAE.

"When I arrived in Moscow in the late 80s, I started supplying spare parts to a company," he said. "At the same time, I told my company that moving steel from here could be a lucrative deal. Almost everyone in the steel mills knew me." His company exported steel to Pakistan using a barter system with payment from Pakistan coming in the form of clothes instead of cash. He said it was a highly lucrative business. 

He later moved back to Pakistan. “Having a Russian wife limited my career development there,” he told Newsweek. “The secret services were also very active during the ’80s, and I thought it better to leave.” He moved to Moscow to work for a Pakistani steel company in the late ’80s, and hasn’t looked back since

He learned Russian and metallurgy well. Then he eventually found a way to apply those skills in Ukraine, one of the world’s top 10 steel-exporting nations. Zahoor also displayed a talent for knowing when to get out of a business, as he did in 2008 by selling his Donetsk steel mill for a top-drawer price of $1 billion, according to Kyiv Post. He has since invested in media and real estate businesses.

Zahoor With Trophy Wife Kamaliya. Source: Politico.eu


Zahoor divorced his first wife to marry Kamaliya (born as Natalya Shmarenkova in 1977) in 2003. Kamaliya won the Mrs. World title in 2008. She is involved in charitable work in both Ukraine and Pakistan. Before the Russian invasion, they lived in a mansion designed to resemble Dubai’s hotel Burj al-Arab in the suburbs of Kyiv. The couple has 8-year-old twin daughters. Zahoor has two grown children, Arman and Tanya, from his previous marriage.

L to R: Kamaliya, Arabella, Mirabella and Mohammad Zahoor. Source: Dad.CEO



Zahoor and Kamaliya have starred in a Fox Entertainment reality show "Meet the Russians". Kamaliya has a singing career with hit singles like "Crazy In My Heart," "Rising Up," and "Butterflies," and she is also famous for singing duets with Russian pop star Philipp Kirkorov.

Here's a BBC Urdu interview with Mohammad Zahoor:

https://youtu.be/9nPRLc8Dh2M



 

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Ukraine's Muslim Billionaire Akhmetov Holds Balance of Power

Ukraine's Muslims Oppose Russia


Friday, March 4, 2022

Arab Muslim UAE Is Top Education and Employment Destination For Indians From Modi's Hindu Rashtra

The United Arab Emirates, a grouping of  seven Arab Muslim kingdoms, has now become the number one destination for education and employment of people from Hindu India, according to the government data from the two countries. 

Indians' Foreign Travel Destinations. Source: Indian Government

India is now ruled by the right-wing Hindu BJP party headed by Prime Minister Narendra Modi whose entire politics is based on extreme hatred of Islam and Muslims. In 2020, Emirati Princess Sheikha Hend bint Faisal al-Qasimi strongly criticized Islamophobia in India. She also expressed solidarity and sympathies with Indian Muslims and Kashmiris.

Indians Students Abroad. Source: Economic Times

Over 1.2 million Indian students are now studying overseas, twice more than a decade ago. The UAE has 219,000 Indian students, Canada 215,720, the US 211,930, Australia 92,383, Saudi Arabia 80,800, Britain 55,465, and Oman 43,600, according to the data from India's Ministry of External Affairs


UAE Expat Population. Source: Global Media Insight

In addition to students, there are millions of foreigners working in the UAE. Currently, the Indian population in UAE is the highest with 2.75 million, followed by Pakistanis with 1.27 million. The UAE has around 0.75 million Bangladeshi nationals, 0.56 million Filipinos, and 0.48 million Iranians. There are also people from Egypt (0.42 million), Nepal (0.32 million), Sri Lanka ( 0.32 million), China (0.21 million) and the rest of the world (1.79million).

Last year, India received $43 billion in remittances from the UAE. Total worker remittances to India reached $87 billion last fiscal year, making it the world's largest recipient of these remittances. 

The United States was the second largest destination for Indian students. China maintained its top position among the leading places of origin for international students, with 35% of all international students in the 2020-21 school year hailing from the country, according to the data released by the United States government.  The second most common place of origin was India (18%), followed by South Korea (4%) and Canada (3%). Some of these countries also experienced the largest year-over-year declines in the number of students who enrolled at US institutions. The largest such percentage decreases occurred in South Korea (-21%), China (-15%) and India (-13%).

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